As its shareholders formally dismantle the Summa alliance, Colombia's Avianca and its US subsidiary are entering the last phase of reorganisation under US Chapter 11 bankruptcy protection with a search for new equity. It filed for court protection in March.

US reports claim that Texas Pacific Group has joined LanChile and German Efromovich, owner of Brazil's regional airline Ocean Air, as serious bidders for a stake in Avianca. Texas Pacific, headed by David Bonderman, holds shares in Continental and America West Airlines, and was a recent bidder for part of Air Canada. Avianca describes negotiations with its potential investors as "advanced".

Avianca has not disclosed how much new capital it seeks, but no more than 20% of its shares may be owned by foreigners under Colombian law. When it filed for reorganisation, debts totalled $240 million.

The airline seeks approval to extend its repayment of a $110 million pension deficit from 10 to 20 years, despite strenuous objections from its pilots, and it has restructured $55 million in aircraft leases. The other $65 million is owed to banks, bondholders, suppliers and vendors, who will be asked to capitalise at least part of that sum.

The final phase of this reorganisation is on a fast track, with Avianca's plan due to be before year-end. However, the New York court supervising the reorganisation could grant a short extension - something it has already done before.

Cancellation of the Summa alliance was widely expected. Juan Emilio Posada, who was president of Summa's management group, recently became Avianca's president. SAM, Summa's third member, was already a subsidiary of Avianca. Hence, when ACES collapsed in August, Summa effectively became an alliance of one.

Source: Airline Business